The acquisition of start-ups can provide the new business with a technological boost that gives it a competitive edge. This deal is a win-win for both the company and the person buying it.
Acquirees get access to a bigger pool of markets, resources, and cash. Their founders, employees, and investors also get a very nice payout.
On the other hand, the people who buy companies gain from having a wider range of products, hiring new people, and growing markets.
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South Africa’s start-up purchase
As of last year, South Africa’s start-up environment had the most exit mergers and acquisitions of any in the world. According to Disrupt Africa’s 2022 South African Startup Ecosystem Report, this is true. The story of acquisitions in South Africa last year began in January when Volaris Group bought Adapt IT for $88 million.
After that, more purchase news came out, like how Principa was bought by Hyperclear, how Inq. bought Syrex, how Gumtree was bought by Impresa Capital, how Teraco was bought by Digital Realty, and how TymeBank was bought by Retail Capital.
From 2015 to 2017, one-third of all African tech start-ups that were bought were from South Africa. Disrupt Africa says that 357 tech start-ups in South Africa raised a total of $993,684,600.
Tshepo Magagane, an investment banker at one of the country’s best banks, says that the country’s economy makes it easier for start-ups to be bought out.
“Acquisitions are mostly made possible by the shape and structure of the economy.” More established companies in South Africa are now putting money back into the IT startup environment. “Our capital markets and banking system are also making a difference,” said Tshepo Magagane.
Significance of startup acquisitions
The tech ecosystem is a group of organizations that work together to help the economy grow through technological progress. One way to do this is to buy up new businesses that are just getting started.
This strategy helps a business grow internationally, get the money it needs to grow, or reach more customers. Africa Fashion International bought the online art market Wezart in order to grow its market. This is an example of how market growth can lead to an acquisition.
Also, companies that have been around for a while and some good start-ups buy other start-ups to spread their risk. This is shown by the fact that Weaver Fintech bought PayJustNow, which let them move into buy-now-pay-later. After buying Retail Capital, TymeBank also began to offer online services for SMEs.
They are additional acquisitions that have grown and improved the firm that bought them. The digital economy requires a strong IT environment. They are essential to turning even new business proposals into successful, high-growth businesses.
Fintech is big in South African startups. According to research from last year, fintech has roughly three times as many startups as any other sector.
South African acquisition narrative
Acquisitions of start-ups haven’t been talked about much in African tech communities. There have been a few mergers and purchases, but only a few fundings that cover the whole continent.
Tech companies in South Africa, which is one of the best places to buy a business, haven’t made news yet. Five months into the year 2023, the government has not bought anything.
Nigeria is the only African nation to have bought a startup. Fluid Coins , a Nigerian cryptocurrency payment gateway, was acquired by Blockfinex, a Barbados-based cryptocurrency exchange. Blockfinex’s parent company, Dan Holdings Limited, a web3 ecosystem and venture fund, enabled this transaction.
Acquisition aftermath
Since big companies and attractive start-ups have gone out of business, investors are wary of buying into new companies without a tried-and-true plan.
No owner buys a business without hoping to make money from it. Trying not to buy high and sell low. It’s the news of the year.
Emirates Telecommunication Group bought almost half of Careem from Uber on April 10 for $400 million. The purchase of Dubai-based Careem for $3.1 billion was a terrible idea.
On April 13, Walmart announced it would sell Bonobos, an online men’s clothing business, to WHP Global. Express and Brand Management lost $75 million. It sold for $310 million in 2017.
Why it might be declining
Acquisitions stopped in the first quarter. In South Africa, venture funding makes it harder for new businesses to get started. AlphaCode and Nasper Foundry had to close because they couldn’t find enough money to spend. Top accelerators.
Every year for three years, the number of funding deals went up. funding and start-ups
Recently, South African venture funders taught Startups don’t get much money for training. Startups need capital to buy. So, it’s hard for both people and businesses to invest in new businesses.
Xoliswa Moraka, the founder and managing director of Colab4Growth (Pty) Ltd., thinks that entrepreneurs are not getting anything out of accelerator classes.
Everyone in the community should talk to each other and say, “Hey, let’s rethink the accelerator model in South Africa.” Markets haven’t been opened by startup programmes. They are fancy classes where creators learn about things they can find online. “This helps neither the entrepreneur nor the ecosystem,” she said.
